1

` Earned Value Management (EVM) has proven itself to be

one of the most effective performance measurement
and feedback tools for managing
g gpprojects.
j

` EVM has been called “management with the lights on”

` It can help clearly and objectively illuminate where a
project is and where it is going—compared to where it
was supposed to be and where it was supposed to be
going.

` EVM uses the fundamental principle that patterns and

trends in the past can be good predictors of the future

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

1
 ` Are we ahead of or behind schedule?
` How efficiently are we using our time?
` When is the project likely to be completed?
` Are we under or over our budget?
` How efficiently are we using our resources?
` What is the remaining work likely to cost?
` What is the entire project likely to cost?
` How much will we be under or over budget?

` Establish a Performance Measurement Baseline (PMB)

o Decompose work scope to a manageable level
o Assigng unambiguous
g management
g responsibility
p y
o Developl time-phased
h d budget
b d for
f eachh workk task
k
o Select EV measurement techniques for all tasks
o Maintain integrity of PMB throughout the project.

` Measure and analyze performance against the baseline

o Record resource usage during project execution
o Objectively measure the physical work progress
o Credit earned value according to EV techniques
o A l
Analyze d fforecast cost/schedule
and / h d l performance
f
o Report performance problems and/or take action

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

2
 ` Planned Value (PV)
` Earned Value (EV)
` Actual Cost (AC)

` Describes how far along a project is supposed to

be at any given point in the project schedule. It is a
numeric reflection
fl off the
h budgeted
b d d workk that
h is
scheduled to be performed, and it is the
established baseline (also known as the
performance measurement baseline)

` Also known as the Budgeted Cost for Work

Scheduled (BCWS).

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

3
 ` It reflects the amount of work that has actually
been accomplished, expressed as the planned
value
l for
f that
h work.k

` Also known as the Budgeted Cost for Work

Performed (BCWP)

` Is an indication of the level of resources that have

been expended to achieve the actual work
performed
f d to date
d or in a time period.
d

` also known as the Actual Cost of Work Performed

(ACWP),

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

4
 9

10

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

5
 Tasks may be planned and measured in whatever
resource units are most suitable to the work,
including labor hours, material quantities, and the
monetary equivalent of these resources. However,
performance management works best when the
physical progress of work is objectively planned
and measured. The techniques used in EVM to
achieve this goal are EV Measurement Techniques
(sometimes called earning and crediting
methods).

11

` Techniques for measuring work performed are

selected during project planning, and are the basis
for
f performance
f measurement during
d project
execution and control

` Earned value techniques should be selected based

on key attributes of the work, primarily the
duration of the effort and the tangibility of its
product.

12

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

6
 ` The performance of work efforts that result in
distinct, tangible products can be measured
directly This work is called discrete effort.
directly.

` Other work is measured indirectly as a function of

either discrete efforts or elapsed time.

` Work that is linked to discrete effort is called

apportioned
pp effort.

` while that based on elapsed time is referred to as

level of effort.

13

Product of Work Duration of Work Effort

1-2 Measurement Periods >2 Measurement Periods

Tangible Fixed Formula Weighted Milestone

Percent Complete
Intangible Apportioned Effort
Level of Effort

14

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

7
 A typical example of fixed formula is the 50/50
technique.
t h i With this
thi method,
th d 50 percentt off the
th
work is credited as complete for the measurement
period in which the work begins, regardless of how
much work has actually been accomplished. The
remaining 50 percent is credited when the work is
completed. The 50/50 technique is most effectively
used on small, short-duration tasks.

15

The weighted milestone technique divides the task

work to be completed into segments ending with
observable milestones and then assigns a value to
the achievement of each milestone. The weighted
milestone technique is more suitable for longer
duration tasks having intermediate products

16

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

8
 The percent complete technique is among the simplest
and easiest, but can be the most subjective, of the EV
q
measurement techniques. This is the case when
at each measurement period, the responsible worker or
manager makes an estimate of the percentage of the
work complete. These estimates are usually for the
cumulative progress made against the plan for each
task. However, if there are objective indicators that can
be used to arrive at the percent complete (for example,
number of units of product completed divided by the
total number of units to be completed), then this can be
a more useful technique

17

If a task has a direct, supportive relationship to

another task that has its own Earned Value, the
value
l for
f theh support taskk may be
b determined
d d
based on (or apportioned to) the Earned Value for
the reference activity. Examples of proportional
tasks might include quality assurance or inspection
activities.

18

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

9
 ` Some project activities do not produce tangible outcomes
that can be measured objectively. Examples include
project management, operating a project technical library,
and the like.

` These activities consume project resources and should be

included in EVM planning and measurement. In these
cases, the level of effort (LOE) technique is used for
determining Earned Value. A Planned Value is assigned to
each LOE task for each measurement period. This Planned
Value is automatically credited as the Earned Value at the
end of the measurement period.

` LOE activities will never show a schedule variance.

C
Consequently,l the
h technique
h i always
l bi
biases the
h project
j
data toward an on-schedule condition. LOE should be
utilized conservatively and should be considered only
when the task does not lend itself to a more objective
measurement technique.

19

Value is planned and measured using the EV

techniques previously outlined. It is earned by
work Earned Value is
accomplishing the planned work.
credited when progress is demonstrated in
accordance with the EV technique selected for the
planned work. For discrete work, observable
evidence of a tangible product or progress is
required.

20

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

10
 To determine Actual Cost (AC), an organization
needs to have a system for tracking costs over time
and by project component. The sophistication and
complexity of this system will vary by organization
and project, but, at minimum, some type of cost
tracking system must be in place that can tie costs
to the plan and to the way Earned Value is credited.

21

22

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

11
 23

` Variances: Schedule Variance (SV); Cost Variance

(CV); and Variance at Completion (VAC)

` Indices: Schedule Performance Index (SPI); Cost

Performance Index (CPI); and To-Complete
Performance Index (TCPI)

` Forecasts: Time Estimate at Completion (EACt);

Estimate at Completion
(EAC); and Variance at Completion (VAC)

24

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

12
 A measure of cost efficiency on a project. It is
the ratio of Earned Value to Actual Cost (Cost
Performance Index = Earned Value / Actual Cost)
A value equal to or greater than 1.0 indicates a
favorable position and a value less than 1.0
indicates an unfavorable condition.

25

A measure of schedule efficiency on a project. It is

the ratio of Earned Value to Planned Value
(Schedule Performance Index = Earned Value /
Planned Value.) A value equal to or greater than 1.0
indicates a favorable position and a value less than
1.0 indicates an unfavorable condition.

26

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

13
 ` Estimate To Complete (ETC). The estimate to
complete the remaining work for an activity,
activity work
package or control account.

` Estimate At Completion (EAC). The cost of the

amount of work to complete schedule activities. It
is a forecast of the most likely total value based on
project performance and risk quantification
quantification.

27

` SV = EV – PV
` SV% = SV / PV
` SPI = EV / PV
` EACt = (BAC / SPI) / (BAC / MONTHS)
` CV = EV – AC
` CV% = CV / EV
` CPI = EV / AC
` EAC = BAC / CPI
` VAC = BAC – EAC
` C% = VAC
VAC% C / BAC
C
` ETC = (BAC – EV) / CPI (same trend)
` EAC = AC + ETC

28

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

14
 29

Project Management Question EVM Performance Measures

How are we doing time wise? Schedule Analysis & Forecasting

- Are we ahead or behind schedule? - Schedule Variance (SV)

- How efficiently are we using time? - Schedule Performance Index (SPI)

- When are we likely to finish work? - Time Estimate at Completion (EACt)

How are we doing coastwise? Cost Analysis & Forecasting

- Are we under or over our budget? - Cost Variance (CV)

- How efficiently are we using our - Cost Performance Index (CPI)

resources?
- How efficiently must we use our - To-Complete Performance Index
remaining reso rces?
resources? (TCPI)
- What is the project likely to cost? - Cost Estimate at Completion (EAC)

- Will we be under or over budget? - Variance at Completion (VAC)

- What will the remaining work cost? - Estimate to Complete (ETC)

30

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

15
 Performance SV & SPI

Measures >0 & >1.0

>1 0 =0 & =1
=1.0
0 <0 & <1.0
<1 0

>o& Ahead of On Schedule Behind

>1.0 Schedule Under Budget Schedule
Under Budget Under Budget
CV
&
CPI =o& Ahead of On Schedule Behind
=1.0 Schedule On Budget Schedule
On Budget On Budget

<o& Ahead of On Schedule Behind

<1.0 Schedule Over Budget Schedule
Over Budget Over Budget

31

Jan 2009 Earned Value Analysis By: Murtada A. Mohammed

16